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Common Bankruptcy Mistakes

If you are filing for bankruptcy, there might be many things you are unsure about.  Below are some of the common mistakes we help our clients avoid in bankruptcy process.

Not Considering Bankruptcy As an Option
There are a lot of people that are in heavy debt that do not consider bankruptcy as an option for relief. For most people, the word bankruptcy has a negative impact. It is often associated with failure, and some people only think of bankruptcy when they are about lose their home or their car. In reality, there is no shame in filing for bankruptcy, in fact, bankruptcy can help relieve your debt and give you a fresh in your life. You may also be able to keep some of your assets. Keep in mind that bankruptcy gives you the power to be in control of your finances.

Procrastination
The moment heavy debt, repossession, wage garnishment, or foreclosure begins; it is time to act, and fast. Time is crucial part of the divorce process, the sooner you file, the sooner you can be done. It is common that some of those that are filing have never before had to deal with lawsuits, foreclosure’s, or harassment from their creditors so they are not sure how to proceed. Knowing that you need help and getting help is important. Ignoring the problem will not make it go away.

Paying off your debt by getting a Home Equity Loan
If you find yourself in a mountain of credit card debt, filing for bankruptcy may seem like something that is not for you. Instead, you think that an alternative would be the best, the most common alternative is getting a home equity loan. However, borrowing money from a secured creditor to pay off and unsecured creditor is not advisable. If you are in credit card debt, what will most likely happen is that the credit card company will call and harass you to pay your debt, sometimes they may go as far as to sue you. All of that pales in comparison to the fact that you can lose your home if you don’t pay off your home equity loan.

Not Listing All Of Your Creditors
As a part of filing for bankruptcy, you are required to list all of your debts. To have your debt discharged, you must list that creditor. In some cases, the debtor might still want to pay the creditor the money owed and that’s fine, but that creditor must still be listed. In fact, bankruptcy law requires you to list all of your creditors.

Buying Things Before Filing
Any transactions made six (6) months before filing as well as transfers, huge purchases, or advances made 24 months before filing are subject to intense review by the trustee. The reason for that is they are looking for any dishonest activity such as a person going on a luxurious shopping spree with the intent of not paying back that debt and then filing for bankruptcy. Any charges 6 months before filing will most likely be looked at. It important to list any necessary charges within 90 days of filing so as to avoid the possibility of being charged with fraud.

Transferring Assets
It is common misconception that the filer is able to transfer or sell some assets to family members or friends for safe-keeping. Not only is this not allowed but is also illegal. Transferring assets before filing can be considered a fraudulent act and those transfers can be reversed by the trustee. If your case is considered to be dishonest due to asset transfer, your debts may not be discharged and your case may be dismissed. It can also potentially bring criminal charges. However, if the transfer was due to business as a normal transaction, it is important that you disclose it. The misconception comes from people wanting to keep their assets, which is understandable. But know that in some cases not all of the property has to be lost. Concealing assets is also just as bad as trying to fraudulently transfer assets. Concealing assets can lead to criminal charges as well. However, mistakes are made and it is possible to forget to list something, if that happens be sure to disclose it as soon as possible.

Trying to Pay Certain Debts Before Filing
It is understandable to want to pay a debt to a creditor you like, or to keep in good faith with. However, you are required to list all payment to any creditors that were made 90 days prior to filing, as for family members or business partners, any payments made to them one year prior to filing must also be listed. The reason being is that preferences are not permitted in bankruptcy, you are not allowed to choose what creditors to pay and not pay, especially if some of those creditors are closely related to you. The trustee has the power to reveres those transactions and demand the money be returned, if the creditor does not oblige, the trustee can file a lawsuit to retrieve the money.

Not Hiring a Bankruptcy Attorney
When filing for bankruptcy, it is recommend that you hire an attorney to represent you. It is possible to proceed in a bankruptcy case without an attorney, however, you will need knowledge of the bankruptcy code and laws that are applicable to you. It is important to remember that your creditors will probably have lawyers representing them, so if you are the one without legal representation you may be at a disadvantage. You can be compelled by the other side into making bad decisions, loose property, or even become subject to further legal proceedings if you do not know your legal rights.

If you are thinking about filing bankruptcy and have questions about the process, call us at 770-609-1247 to speak to one our experienced bankruptcy attorneys.

 

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